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AUSTIN-As the metro’s retail market edges toward a four-year high for all indicators, investors and tenants are pushing hard for a piece of the action. Vacancy is hanging at 7%, the best reading of the state’s four metropolises, and investment sales have created a buzz in terms of prices and offers.

“Austin is so well thought of from the East Coast to the West Coast that if there’s an available property there that makes sense, they all want a piece of the action,” Lance Morris, president of the Austin office for Dallas-based Weitzman Group, tells GlobeSt.com. “Our investment market couldn’t be any better.”

A recent report by Marcus & Millichap Real Estate Investment Brokerage Co. puts cap rates for multi-tenant properties in the mid- to high 7% range. Single-tenant assets are perking along at a 7% cap rate, on average, while properties filled by top-tier tenants are producing in the mid-6% range.

Cap rates have been particularly aggressive in the past year, according to Brad Bailey, Marcus & Millichap’s regional manager in Austin. “There’s such a demand for properties here,” he says. “Well-located, well-tenanted retail is demanding top dollar.” In the first quarter, a six-property portfolio, totaling 660,000 sf, brought $75 million, the brokerage house’s researchers reported.

Bailey says the big-ticket retail sales are just keeping pace with the rest of the market. A recent study showed single-family housing sales rose 4% just in the past month. The push for product to keep pace with the rooftops has developers raising 2.7 million sf, a slight increase from last year’s construction level. “The developers and tenants don’t go anywhere that they feel there isn’t a demand for their product,” Bailey says. “The parking lots are full.”

According to a Weitzman Group analysis, the 28.5 million sf of existing retail space is 93% filled. Some retailers are carving out second and third locations; others are pushing for their sixth and seventh spots in the sprawling metro.

Morris says the true indicator as to the market’s strength will be how quickly 11 Albertson’s grocery stores will be filled. The store closings are set for Aug. 3-18, leaving the metro with five Albertson’s when the dust settles on the Boise, ID-based grocer’s retreat.

Morris’ challenge is to find new tenants for the 55,000-sf to 60,000-sf stores. In fact, just the fact that the owner, Kimco Realty Corp. of New Hyde Park, NY, isn’t planning to sell the real estate is a strong indicator of the market’s standing in its commercial sector.”A lot of tenants are looking at this as a great opportunity,” Morris says. “Every one has interest from somebody.” But, he adds, only a few will remain as grocery stores. Tenant interest is coming from furniture, fitness, electronics, office supplies, shoes and sporting goods sectors.

Bailey forewarns one red flag could rise. “My biggest concern moving forward is keeping up with the infrastructure,” he says. The outlying areas, many with two-lane highways, are getting larger developments, upward of 500,000 sf, which by virtue of size will necessitate road-widening projects to keep traffic flowing smoothly.

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